Business Ethics in the News

A discussion of the week's top business ethics stories by Kirk O. Hanson, Executive Director of the Markkula Center for Applied Ethics and John Courtney Murray S.J. University Professor of Social Ethics

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Monday, Mar. 16, 2015

AP Photo/Jeff Chiu

Anyone who thinks ethics and ethical analysis has little role in contemporary business only needs to consider Facebook’s dilemma in setting rules for what postings it bans. An article in today’s New York Times updates this ongoing story of applied ethics. From its earliest days, Facebook recognized some users would use the platform inappropriately. Early rules included banning pornography, a relatively easy decision. But there are postings that depict and encourage breast feeding and concern for breast cancer. Are they to be permitted? Postings by terrorist groups are banned, as are supportive statements for groups involved in “violent, criminal or hateful behavior.” Defining such statements involves prudential, indeed ethical decisions.

The choices have gotten tougher as Facebook’s community has grown and has spread globally. What about different values in different societies? What about different regulatory rules? What should Facebook do if a government official wants critical posts taken down? The ethical choices will only multiply as time goes on. I hope Facebook recognizes that it is in the ethics business, and builds its capacity to anticipate and make ethical decisions.

Thursday, Jul. 17, 2014

For one week in 2012, half a million Facebook users took part in a massive psychological experiment aimed at discovering if emotions could be spread through social media. The problem? Users had no idea it was happening. It turns out Facebook routinely runs experiments on users; in fact every Facebook user has been a subject at some point, whether it be slight modifications in formatting or major feature changes.

Just about every Internet service does experiments, but this one altered users’ news feeds to highlight items with either positive or negative emotional content, and then measured if it affected the emotional content in each user’s future posts.

While it is agreed the experiment was legal, critics argue this type of testing crosses the line, particularly when consent is buried in a terms of service. Facebook researchers have taken to social media to apologize for the study, but the company’s official statement is that Facebook users agree to these types of experiments as part of the terms of service. Does Facebook need more explicit consent for this type of experiment? For all experiments?

Kirk: The beauty in this unfortunate case is that it rests at the intersection of research ethics and business ethics. While every study involves influencing the subject's emotional state -- e.g. which color do people respond better to? -- this experiment went one step further by making emotional manipulation its sole purpose. The problem here is with the blanket consent that Facebook is hiding behind. While legally permissable, companies should act in the spirit of the law and ensure users know what they are getting into: especially with experiments that are this controversial. What right does Facebook have to know what I am feeling as I'm using their service?

Patrick: Let's not forget that Facebook is a for-profit company, offering a free service. We should all anticipate that Facebook will go to great lengths to monetize their product. A user's emotional state while using Facebook has direct implications for the amount of time they spend on the site and how interactive they are: both of which are critical to get companies to pay for advertising on Facebook. Yet there is still a concern that this experiment was beyond the pale: if emotions can spread through Facebook, can idealogies and political views as well? It's clear that the law is not just behind on regulating these emerging industries; it's also behind on regulating the experiments that shape their future.

Thursday, Feb. 20, 2014

Source: Wikipedia

The average American receives 2 weeks of paid vacation, but a new trend among Silicon Valley tech firms goes against the norm by offering employees unlimited vacation time. Among the big names to implement the policy are Netflix, Best Buy, and Evernote, in addition to a number of startups. Employers adopt the policy with the hope of keeping productivity up in the long run, as well as a perk to recruit top talent. Employers also tout the policy as a way of “treating their employees like adults,” and building a culture of both freedom and responsibility. But there’s also a silver lining for employers — with unlimited vacation policies, days off are not accrued. This means that when a worker leaves the company, the employer no longer has to provide them with a lump sum for unused vacation time. Furthermore, at many fast paced firms, there is never a “good time” to take vacation, and without clear guidelines from employers, it may result in even less vacation time taken. Are unlimited vacation policies in the best interest of the employees or an underhanded cost cutting measure?

Patrick: Unlimited vacation policies come down entirely to implementation. When coupled with a constant and extreme pressure to produce results, these policies put employees between a rock and a hard place — and at the end of the day, the company saves money at their expense. To be done right, unlimited vacation policies must be paired with a corporate culture that actually lives by responsibility and freedom, along with a clear message from management that employees are expected to take vacation time. Evernote addresses this by offering a $1,000 stipend, if and only if employees take a one-week vacation: those who don’t miss out entirely.

Wednesday, Jan. 29, 2014

With a $4 billion valuation, Uber is among the fastest growing startups around. The app-based service helps people find a taxi and then facilitates the transaction, but what’s getting more attention is that just about anybody with a car can register with Uber to be a de facto taxi. With this new “sharing economy,” many questions of regulation are emerging, some of which are coming to a head with a wrongful death suit filed on Monday against Uber. Sophia Liu, a 6-year-old girl, was struck and killed by an Uber driver on New Year’s Eve. The driver, Syed Muzaffar, was on his way to pick up his next fare at the time of the accident. Uber’s legal team has argued that because Muzaffar did not have a fare at the time, “he was not providing services on the Uber system during the time of the accident.” The family’s attorney has countered that because he was on his way to pick up a fare, he was in fact representing Uber at the time of the accident. For drivers like Muzaffar, Uber has commercial insurance, but it only kicks in when there is a customer in the car; otherwise, the driver must have their own coverage. Is Uber accountable for the actions of its drivers in-between fares?

Kirk: In the sharing economy, we do put ourselves at more risk. While it may not be practical for Uber to screen and license every driver, online resources could enable them to weed out the least capable by checking driving and criminal records, and by requiring adequate insurance. There is a rationale for "let the user beware" as long as the rudimentary measures are taken. eBay faced this problem of serving as the market for many and unknown buyers and sellers, and then solved most of the problem with user ratings and payment processing that protected the buyers. Uber should also carry some level of liability insurance, and should not hide behind the distinction that Muzaffar was going to pick up a fare rather than carrying a fare at the moment.

Patrick: For me, I think Uber’s app clears all this up. Say you want to get a cab. The app recognizes your current location and sends a signal to all of the drivers in the area. If the driver is willing to take the fare, they indicate this on the app, followed by the customer choosing to accept or decline that particular driver. Once done, the app tells the customer how long until the driver arrives, and even tracks the driver by GPS. The transaction starts then and there, and so should Uber’s liability.

Monday, Nov. 25, 2013

Tesla, the manufacturer of high-end luxury electric cars, is under intense media and regulatory scrutiny as three incidents have surfaced of the lithium ion battery within Tesla’s Model S catching fire after a collision. In each case, the battery, which is located beneath the passenger cabin, ignited after the undercarriage was struck in the collision by a concrete wall, curved part of a truck, and a trailer hitch, respectively. Tesla rightly says no one was injured due to the fires, as the onboard computer warned each driver to exit the vehicle, and its CEO, Elon Musk, has been very vocal about the rate of battery fires for the Tesla Model S being much lower than that of conventional cars. As with any emerging technology, safety issues are paramount to public trust, as demonstrated by the temporary grounding of the new Boeing 787 aircraft over the safety of its lithium ion batteries. Tesla is facing at least three alternative actions: strengthening the undercarriage, thereby increasing the weight of the car and reducing performance; investing heavily in attempts to preempt the lithium ion battery’s tendency to catch fire; or doing nothing, continuing to point out that the fire risk is very small and is not a substantial safety risk to drivers. What role does ethical deliberation play in this decision? What should Tesla do?

Kirk: As with any manufacturer of consumer products, Tesla’s ethical obligation is to have a deliberate and sustained commitment to the continual improvement of the safety of its products. But in business ethics, there is no such thing as an ethical decision that is insulated from the pressure of profits, losses, and incentives that often dictate behavior in the business world. Tesla’s current dilemma will force their executive team to make some tough decisions in addressing the tension between performance and cost efficiency on one hand, and safety on the other. Regardless of the balance that Tesla strikes, in addition to complying with automobile safety regulations, it is on them to openly convey the thinking behind these decisions, and to take into account the wishes of their customer base in their deliberation.

Patrick: I think the media is overhyping the Tesla fires, but it’s no surprise. With the celebrity of its CEO, the Consumer Reports records set by the Model S, and the general novelty of the company, Tesla is a journalist’s go-to option for peaking their audience’s attention. Sometimes you have to take the good with the bad. As for Tesla’s next move, it largely depends on the findings of the National Highway and Transportation Safety Administration’s investigation. Up until this point, Tesla has increased the warranty to cover any incident of battery fire, even if caused by driver error; has increased the speed in which the Model S lowers itself 1 inch for aerodynamic purposes; and has put its effort into countering false claims about the Model S. For now, I think Tesla is in the clear.

Friday, Oct. 11, 2013

After the release of its IPO filing, Twitter has come under heavy scrutiny for the lack of women amongst its board, investors, and executive team — save for Vijaya Gadde, General Counsel, who was appointed 5 weeks ago. High tech has long been criticized for having a gender imbalance, with only 5.7% of employed women in the US working in the computer industry; but in the wake of Sheryl Sandberg’s top seller, “Lean In,” the issue is front and center in the public consciousness. Critics of Twitter claim that the lack of gender diversity is among the many symptoms of Silicon Valley’s chauvinistic and male-dominated culture. Those close with Twitter’s CEO, Dick Costolo, report that finding a woman board member has been a priority, but has been a difficult process. Is Twitter in the wrong for going to IPO without a diverse leadership team? If so, should the public hold them accountable?

Kirk: The scarcity of women is a clear sign of the power of corporate cultures, and no doubt, Silicon Valley’s culture is one characterized by male dominance. No entrepreneur or venture capitalist would say that they hold a bias toward women, but it’s inevitable that unconscious biases develop in cases like this. Startups are hesitant to promote women because they don’t fit the traditional mold of Silicon Valley leadership, leading to even fewer women in these positions. It’s a vicious cycle. The only way this is going to get solved is by a dedicated effort by Silicon Valley firms to address this culture issue, and a steady stream of public pressure to keep them honest.

Patrick: To start, if Twitter went out 5 weeks ago to get a female in a leadership position (which they did), that’d be just as bad as not having any women at all. Yes, firms need to make an effort to get women in positions of power, but that doesn’t mean that hiring women should be a PR move or something done out of political correctness. It takes a sustained effort to make a sincere attempt at inclusiveness, better yet, remove arbitrary exclusion. This situation does not have a quick fix. Twitter made their bed a long time ago, now it’s time to lie in it.

Tuesday, May. 21, 2013

Monday, Congressional investigators disclosed a report finding that Apple avoided tens of billions in taxes on overseas earnings through a web of subsidiaries unprecedented in scope and complexity. Among the subsidiaries is Apple Operations International, AOI, which was incorporated in Ireland but is run by top executives in Cupertino. AOI’s income between 2009 and 2012 was $30 billion, yet has not filed tax returns in the past five years. In the US, corporations are taxed depending on where they were incorporated, whereas in Ireland it is dependent on where they are operated and managed. Accordingly, Apple has used the gray area between the two countries tax codes to create a “stateless” corporation exempt from taxes, record keeping requirements, and tax return filings. The panel has not accused Apple of breaking any laws, and Apple is certainly not the only company with similar tax practices. Nonetheless, some argue Apple is failing to pay its “fair share” of taxes to the US and other countries where it generates revenue. Does Apple have an ethical obligation to pay more taxes?

Kirk: No one has argued that Apple disobeyed the law and no company is obligated to pay more taxes than legally required. However, Apple is exploiting outdated tax laws and the lack of coordination between countries to shield its profits. The result is that Apple pays far less than its “fair share.” Real people suffer when tax revenues are low. Apple’s ethical obligation is to take a public-minded role in the creation of a new tax regime that closes the loophole it’s exploiting.

Patrick: Apple’s not the problem here: it’s the symptom of a failing tax code. To date, the tax code sets the rules of the game and companies play within them. The tax code needs to consistently adapt and change to companies’ behavior to ensure the desired results are achieved and that the proper incentives for those results are in place. Apple’s ethical failing, in this case, is their reluctance to call it like it is: Tim Cook at Tuesday’s Congressional hearing, “We don’t use tax gimmicks.” If the shoe fits . . .

Thursday, Apr. 25, 2013

This week, eBay ramped up opposition to the Marketplace Fairness Act, a bill that would allow states to collect sales tax on goods bought from out-of-state online retailers. The campaign included a widely distributed email from eBay President John Donahoe, in which Donahoe frames the legislation as a threat to small business growth, claiming it treats small businesses and multi-billion dollar companies exactly the same. eBay is calling for a compromise of an exemption for companies with less than 50 employees or less than $10 million in out-of-state sales. It is no surprise that eBay is up in arms over the bill; its online marketplace model directly benefits from the online retailers that use its service, but there is concern that eBay is using its lobbying power to assist small businesses in tax evasion. Are eBay’s actions justified in the name of protecting small business? Or is eBay complicit in tax evasion? Also, is there anything wrong with eBay using its subscriber list for lobbying purposes?

Patrick: eBay’s plight for the mom and pop online retailers seems to check out until it comes to light that the Marketplace Fairness Act excludes companies with less than $1 million in gross sales. While companies with just over $1 million in sales aren’t going to compete with Amazon head-to-head, they are big enough to be paying taxes. There’s a lot at stake for eBay in the decision so I do not fault them for attempting to keep the status quo, but their argument just doesn’t cut it. On leveraging their email list, I’m for a free market approach: if users don’t want to receive eBay’s messages, political or otherwise, they should unsubscribe.

Kirk: It’s simply unfair to give online businesses an advantage over brick and mortar companies. It is time we abandon this charade that the economy will be hurt if we tax online businesses. If anything, the revenues collected will shore up local government, which provides the infrastructure for all economic activity. The $1 million exemption Patrick mentions gives more than enough help to the smallest businesses. I am more worried than Patrick about eBay’s political clout from using their subscriber list aggressively.